South Korea's Financial Intelligence Unit (FIU) has made public its plans to intensify scrutiny of the country's cryptocurrency exchanges, aiming to expel platforms considered "unsuitable" from the local market starting in 2024.
According to The Korea Times report on February 12, the Financial Intelligence Unit intends to broaden the scope of screening procedures in the cryptocurrency market to prevent unqualified exchanges from operating within the national economy.
As part of its efforts, the regulator aims to implement a pre-emptive trading suspension system for suspicious transactions on already existing platforms in South Korea. This system would allow freezing transactions even during the pre-investigation stage, a measure recommended by the Financial Action Task Force and under consideration by 49 countries globally.
Since 2021, the Financial Intelligence Unit has been granting licenses to virtual asset service providers in South Korea, with the three-year terms of these licenses set to expire in 2024. Companies seeking license renewal will undergo a thorough review of their anti-money laundering infrastructure, operational capabilities, and consumer protection measures. Failure to meet the standards outlined in the inspection will result in denial of registration.
Ahead of the enactment of the Virtual Asset Consumer Protection Act in July, authorities are conducting a comprehensive review to ensure compliance. Financial Intelligence Unit Commissioner Rhee Yun-su emphasized the need for institutional improvements to facilitate the seamless operation of the cryptocurrency industry amidst upcoming mass registration renewals and the implementation of new regulations.
The Virtual Asset User Protection Act, passed by the National Assembly on June 30, 2023, consolidates various cryptocurrency-related bills and imposes penalties for illegal trading activities. Recent reports also indicate ongoing investigations by South Korean authorities into alleged unregistered operations by cryptocurrency exchange OKX, highlighting the government's proactive stance in regulating the crypto sector. Additionally, the Financial Services Commission has warned of severe consequences, including potential life imprisonment, for crypto criminals involved in illegal profit-making exceeding $3.8 million.
